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The third box shows that later that same day, prices traded there again, only this time after making the low of that day.

The lows of that fourth box are at just about the middle of the congestion shown in the third box. A short position was put on at the takeout of the congestion shown in the fourth box. As can be seen, prices made a nice move, and although gold didn't run, I was able to cash all three contract-sets.

The fifth box shows the congestion level at the end of the day that approximately matches the congestion area made earlier at box four. I would not trade long the following day based solely upon a breakout of the congestion in box five, because it is not the congestion closest to the high.

Instead, I would await further developments. I'd like to see it trade again at that level, and then take the most logical breakout of that area.

This chart shows an almost perfect trade in the S&P 500. Prices congested right after making the high and just prior to the close. The next morning saw a gap up open, and then prices trading right back into the congestion area. Then prices played around for awhile and finally broke out. The S&P ran all the way to the end of the day.

Although I do not trade bonds on the five minute chart, I just had to show this classic example of what I'm talking about. It just happens to be a day when there was enough activity in bonds for them to "form up" more than they normally do on the five minute chart.

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